In a period of rising prices, which of the following inventory cost formulas generally results in the lowest net income figure?
A)average cost
B)FIFO
C)The inventory cost formula only affects the statement of financial position.
D)Need more information to answer.

Question

Quizplus · Accepted Answer

In a period of rising prices, the average cost method results in a lower net income compared to FIFO because it averages out the cost of older, cheaper inventory with newer, more expensive inventory, leading to a higher cost of goods sold.

In a Period of Rising Prices, Which of the Following